Speaking on a panel at the Financial Services Council Summit in Sydney, FPA chief executive Dante De Gori discussed how advice will need to adapt in light of recent reforms and future clients.
He noted advisers have had significant anxiety stemming from multiple factors recently, including the FASEA reforms. The FASEA exam, he said, has been “the greatest source of calls from people who have either never sat an exam, or it’s been decades since they have. We’ve all been through exams at school, but when your professional livelihood relies on you passing the exam, that creates a lot of stress.”
The broader issue, though is the cost of advice in the future. Referencing the recent ASIC report on consumer perceptions of advice, De Gori said he saw it as a positive that “more than 40% of Australians want to get advice. The barrier, though, is cost, or rather the perception of cost. They don’t know what advice is, what it should be worth or the value of it.”
He continued: “That is a barrier that stops, as per the report, about 20% from getting advice. We have to tackle that, and tax deductibility is definitely front-of-mind in that regard. If you think of financial advice as being of national importance - just after your health - I think some form of subsidy should be provided for those on low incomes to get advice.”
Beyond the idea of subsidies, De Gori also mused on how pricing models will change in the future. Answering an audience question regarding why people should pay a “retainer” to an adviser when they pay doctors and accountants on a transactional basis, he said: “The doctor analogy is a good one to make, but there are a few flaws in the argument. I agree we’re moving towards a new pricing model. The retainer model can still work, and it depends on the client’s need. That’s the fundamental point: the consumer will dictate what it will be.”
“The consumer may want a retainer,” he continued, “because they want the comfort of certainty of having the adviser on call. The difference we’re going to see is that everything has been bundled in the past. Now it needs to be separated. Advisers can’t be in a position of not delivering on services that were promised.
“But you will also see a transactional model where when someone actually needs the advice, they’ll pay for it. It’s not transactional to the extent that the relationship becomes transactional - you’re still that person’s adviser; they’re just paying you when they need you.”
He concluded his answer by noting that despite the above, there was still a fundamental difference between the way we interact with doctors and the way we pay for advice: medical appointments, for most people, are subsidised.
“That isn’t the case for advisers,” he said. “Which brings be back to what I said before: there should be some form of subsidy for financial advice for those who need it.”
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